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HomeMy WebLinkAbout2010-04-08 CC Minutes - UVSD power point 1 Presentation Outline Introduction Objectives & Approach Assumptions General Annual Escalation Factors Reserves Findings Revenue Increases Projected Rates 2 Introduction Purpose of meeting Present preliminary modeling results Solicit input and answer questions Discuss related issues Review next steps No official action is required today Policy direction is needed 3 Objectives & Approach Update sewer rates for next five years Rates projected within a 10-year planning period O&M projections are based on current budget Capital projections are based on capital improvement schedule Debt service coverage is maintained Adequate reserves are maintained Each agency’s rates should reflect its costs Allocate shared costs in proportion to ESSUs* Allocate direct expenses to appropriate agency only No cross subsidies between agencies The agency’s will maintain similar financial positions *ESSUs = Equivalent Sewer Service Units (e.g., one single-family dwelling) 4 Assumptions - General Expense and revenue projections Low inflation rate Salary cost increases consistent with current agreements Low energy cost escalation rate Low construction cost inflation rate All factors are constant during planning horizon Low growth rate Higher for District than City District’s proportionate share gradually increases 5 Assumptions – Annual Escalation Factors 6 Assumptions – Cost Allocations Shared expenses Provide common benefit to the City and District Apportioned between City and District based on current ESSUs Salaries of system operating and administration staff O&M for collection system and treatment plant Capital improvements Debt service related to current customers Direct expenses Provide benefits to City or District only Salaries of District staff Capital projects of specific benefit Transfers to specific reserve funds 7 Assumptions – Reserves: 7 Fund Types Shared funds common to City and District 612 Operations 614 Capital Improvement Direct City 620 Capital Improvement 622 Rate Stabilization Direct District 650 Capital Improvement 642 Rate Stabilization 641 Special 8 Assumptions – Reserves: Modeling Rules Direct District 650 Expansion Minimum and Target balance: no target balance established Annual transfers: Transfer to Debt Fund 611; From Joint Fund 612 for connection fee shortage 642 Rate Stabilization Minimum and Target balance: no target balance established Annual transfers: Transfers to Joint Fund 612 to meet coverage and reduce rate increases; Net Income from Joint Fund 612 641 Operations Minimum and Target balance: no target balance established Annual transfers: no transfers projected 9 Assumptions – Reserves: Modeling Rules Shared funds 612 Operations Minimum balance: 2 months operating expenses + 2 months debt payment Target balance: 3 months operating expenses + 3 months debt payment Annual transfers: To Capital Projects Fund 614; To Debt Fund 611; To/From Rate Stabilization Funds 622 & 642 614 Capital Minimum balance: $500,000 Target balance: no target balance established Annual transfers: From Joint Operations Fund 612 10 Assumptions – Reserves: Modeling Rules Direct City 620 Expansion Minimum balance: no target balance established Target balance: no target balance established Annual transfers: Transfer to Debt Fund 611; From Joint Fund 612 for connection fee shortage 622 Rate Stabilization Minimum balance: no target balance established Target balance: no target balance established Annual transfers: Transfers to Joint Fund 612 to meet coverage and reduce rate increases; From Net Income from Joint Fund 612 11 Assumptions – General: Debt Service Coverage Gross coverage ratio > 1.00 Numerator = rate revenue + connection fee revenue + non-operating revenue + interest earnings Denominator = debt service (principal & interest) + operating expenses Net coverage ratio > 1.20 Numerator = rate revenue + connection fee revenue + non-operating revenue + interest earnings + rate stabilization reserve transfers – operating expenses Denominator = debt service (principal & interest) 12 Findings – Net Coverage Ratio The goal of the rate structure is achieving coverage and funding operating and capital expenditures. This graph depicts the success of the rate structure in accomplishing part of that goal – funding operating expenses and debt payments. Funding sufficiency for capital requirements is determined by reviewing fund balances in the capital funds. 13 Findings – Projected Revenue Increases 14 Findings – Projected Fund 612 Balance 15 Findings – Projected Rate Stabilization Funds 16 Findings – Projected Rates 17 Policy Direction Use of reserves Rate Stabilization (City Fund 622, District Fund 642) Connection fee shortage loan from rates District Special (District Fund 641) Replenishment of reserve balances Funding capital projects Joint Fund 614 Escalation factors 18 HF&H Consultants, LLC Suite 230, 201 North Civic Drive Walnut Creek, CA 94596 925-977-6950 19